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Retracement Levels For Corrective Waves

18/06/2013 Editor

Fibonacci retracement tool is widely used in Elliott Waves Theory as nowadays the trading platforms available are offering the software for doing this automatically.

Being corrective waves, the second and the fourth waves are usually the ones to be identified using such retracement levels. As stated on the previous chapter, second wave minimum retracement should be minimum 20% of the first wave and it can retrace almost the entire first wave (even if this is rare) and fourth waves should go between 38.2% retracement out of the third wave and they rarely travel beyond the 50% rarely. However, if the pattern the fourth wave is in is an ending or a leading diagonal, then the retracemen level can be more deeply into the third wave territory.

Corrective waves are complex waves and they are one of the most difficult areas to interpret regarding he Elliott Waves Theory. It is important to understand them and to understand what kind of shape they can take.

The more complex the correction, usually the more deeper the retracement goes into the territory of the previous wave (first wave and third wave) and also the more powerful the move that comes after such a correction.

The recordings that come with this chapter will show you some examples with both second and fourth waves retracement/corrections and what to look for when a specific retracement level is reached.